Question: please help!! Assignment Your firm has been hired as a finance consultant by Spartan Sprockets, Inc., who have decided to invest in a new sprocket

Assignment Your firm has been hired as a finance consultant by Spartan Sprockets, Inc., who have decided to invest in a new sprocket manufacturing system. The company has narrowed the available options down to 3: your job is to analyze the financial data for each system, and make a recommendation to Spartan Sprockets as to which system they should purchase The data that is common to each system is as follows Whichever of the new systems the company will purchase will require the construction of a new factory to house it Anticipating that a new factory would be needed someday, the company spent 5,000,000 to acquire the necessary land in 2015 The factory will cost the company $10,000,000 to construct The total amount of the Initial Investment (don't include Net Working Capital in your Depreciation calculation) will be depreciated straight line to zero through the life of each project (pay attention to the life span of each individual project) Last year, the finance committee of Spartan Sprockets spent $50,000 on a fact-finding tour of Oshkosh, Wisconsin to look at a similar manufacturing system to those they are considering buying. The company will need to spend $500,000 on infrastructure improvements in order to build the factory Over the past 2 years, the company has spent $150,000 on research and development to see whether a new system was needed The company's Tax Rate is 21% The company has assigned a required rate of Return for all of the systems of 10% * System B Base Case: Purchase Price: $3,500,000 .Salvage Value: $ Net working Capital Needed: $550,000, 40% of this will be recovered in the terminal year of the project Annual Sales attributed to this system: $22,000,000 Total Costs: 78% of Sales This project is to be evaluated using a 4-year time frame * Alternate Scenario: Assume Total Costs have risen to 78.15% of Sales There is a 75% chance that the base case will be accurate, and a 25% chance that the Alternate Scenario will occur
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
